AQMetrics hosted its latest Dublin MiFID II meetup last week, just as the countdown to implementation has turned to the number of weeks and days remaining – rather than months. Co-hosted with Brown Brothers Harriman, the event brought the Dublin MiFID II community together to discuss how best to prepare for the changes being ushered in under the new rules. The timing of the Dublin meetup was significant, following on from the Central Bank of Ireland’s review on suitability requirements. As a result, the regulator has urged firms to assess their individual requirements with their boards before 31 October 2017.

Call for clarity

Adrian Whelan, Senior Vice President of Regulatory Intelligence, Brown Brothers Harriman chaired a panel of leading industry figures as they reviewed where the biggest challenges lie. Ronan Gahan, Group CEO of Platform Capital Holdings, spoke on the previous lack of a MiFID representative body, and how some SME’s have struggled as a result with regulatory engagement. Transaction reporting was highlighted as a key challenge by Claire Murakami, Bank of Ireland, Senior Manager Business Controls, due in large part to the sheer amount of data involved. She also warned that a lack of clarity meant firms were at risk of having to re-work everything at a later date if they find their original interpretations of the rules were incorrect. Niamh Mulholland, Associate Director Regulatory, KPMG agreed that there is uncertainty around what information is required to fulfil regulatory obligations, but warned that regulatory engagement has been very detailed around the requirements and so firms will be expected to comply regardless.

Role of technology

In addition, Mulholland argued that although the need to build new systems is currently a burden, she also believed that those firms which invest in good technology now are going to be well placed commercially going forward. Having this data management infrastructure in place may well put firms in a good position, both in terms of enhanced cybersecurity and in terms of informing their business strategy, she said, adding that it was one of the few positive conversations taking place around MiFID II. Murakami agreed that technology investment is going to give certain businesses a ‘huge competitive advantage’. For example, a number of Tier One banks are planning to hook directly into the APIs of the Approved Publication Arrangements (APAs), allowing their dealers to access the data and see a real-time spread of what is happening in the market. This will of course also benefit their customers in terms of improved data analytics, she added.

Downside to transparency

However, while he welcomed incoming changes such as fee transparency, Gahan warned that the initial impact of MiFID II will be negative on market participants, but will benefit retail investors. Murakami agreed, predicting that its impact in the medium- to long-term will be negative – and that regulation in general is making us more siloed, drying up liquidity and creating a challenge to the globalization of market access. While increased information and good transparency is a good thing, Mulholland added that liquidity and fragmentation is likely going to be a real problem. That will be extremely disruptive, she explained, especially with Brexit coming up on the horizon as well.

What should firms be focusing on now?

Gahan believed the most important thing the industry could do ahead of the implementation date is to prioritise the areas which are likely to be measurable come January 2018. Murakami agreed, adding that firms should document and evidence all their efforts to show that they made every human effort to comply. Firms should also be focusing their efforts on their high priority and high impact areas, according to Mulholland – both from the business and the client perspective. And in answer to his own question, Whelan added that prioritisation is key, as there is of course a lot going on. However, he warned that it is the hard, binary things which firms should be focusing on getting right. If the market infrastructure is not there, then that is not their problem. Yet ultimately there is no longer any reason to delay on implementing the operational and reporting components, he concluded.

We will be holding further MiFID II events in London, New York and Dublin – for an invite please contact lorraine.toland@aqmetrics.com.